The idea of President Gustavo Petro to invite the Pension Fund Administrators (AFP) to return the pension savings of Colombians to local investments could be more than counterproductive.
Petro asked this morning that foreign investments return after the bankruptcy of Silicon Valley Bank (SVB) and two other banks in the United States. Well, according to the president, “55% of the pension fund portfolio, that is, the stock of contributors’ savings, is outside the country.”
Given the collapse of foreign markets, I ask the administrations of private pension funds to bring pension savings to the country.
Today, 55% of the pension fund portfolio, that is, the stock of contributors’ savings, is outside the country
— Gustavo Petro (@petrogustavo) March 14, 2023
The problem is that, according to experts, part of the investment made by pension funds It supposes the principle of risk diversification and it is not a good idea to put everything in the same market.
Jorge Llano, AMV’s vice president of Market Development, assures that if this decision is made, the money from Colombian pension savings would also be at risk.
“It is very easy to understand how foreign investments operate, in long-term terms. one should always have a diversified portfolio with significant participation in several countries to avoid country risk, that it is materializing, it is increasing or devaluing those investments, affects it and also that the others compensate those losses”, explained Llano.
According to the expert, this is precisely what is happening with the Colombian market.
“We have seen a rise in the hard TES rate, although they are recovering, they are still very high and the stock market is also low on yields and what is happening is that the Country Risk is materializing with a rise in the dollar, a devaluation and Given that the AFPs have investments abroad, this is helping to have better yields and offset devaluations within the country“, I point.
In the Pension Fund Administrators (AFP) and other entities there are no direct observations in SVB, while in the administrators the exposure to venture capital investment funds is practically nil, experts explained.
I don’t see the “collapse of foreign markets” and if you speak for the SVB, that’s what you have an FDIC for. Now, if that is equivalent to a collapse, let’s remember what happened to public banks in the 90s, banks where, for example, the ISS had a very high participation (BCH).
— Jorge Llano (@jllanosala) March 14, 2023
“The issue is that this evaluation should always be done in the long term and not by circumstances, pIn order to avoid that the 18 million affiliates have much bigger losses just for being concentrated in one country and in that case, diversification is very important and in the future it may be better if the results of companies like Apple or Tesla are brought to Colombia and this will help us more”, he pointed out.
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